The Future of Cryptocurrency: 5 Experts’ Predictions After a ‘Breakthrough’ 2021
2021 was a big year for cryptocurrency. But what’s next in 2022?
We’ve seen Bitcoin hit multiple new all-time high prices over the past year — followed by big drops — and more institutional buy-in from major companies. Ethereum, the second-biggest cryptocurrency, notched its own new all-time high late last year as well. U.S. government officials and the Biden administration have increasingly expressed interest in new regulations for cryptocurrency.
All the while, people’s interest in crypto has skyrocketed: it’s a hot topic not only among investors but in popular culture too, thanks to everyone from long-standing investors like Elon Musk to that kid from your high school on Facebook.
In many ways, 2021 was a “breakthrough,” says Dave Abner, head of global development at Gemini, a popular cryptocurrency exchange. “There’s tremendous focus and attention being paid to [the crypto industry].”
Cryptocurrency Regulation
Expect continued conversations about cryptocurrency regulation. U.S officials have shown a particular interest in stable coin regulation.
Lawmakers in Washington D.C. and across the world are trying to figure out how to establish laws and guidelines to make cryptocurrency safer for investors and less appealing to cybercriminals.
Gensler recently went so far as to say investors are “likely to get hurt” if stricter regulation is not introduced. Plus, the IRS has an obvious interest in making sure investors know how to report virtual currency when they file their taxes. Gensler’s and Powell’s comments are consistent with an emerging view among the Biden administration and other U.S. lawmakers that more cryptocurrency regulation is needed.
What new regulation could mean for investors
The $1.2 trillion bipartisan infrastructure bill signed by the president in November includes crypto tax reporting provisions that could make it easier for the IRS to track crypto activity among Americans. Even before the new legislation, that’s why experts say investors should keep records of any capital gains or losses on their crypto assets. The new rules may also make it easier for investors to properly report crypto transactions.
“Exchanges will have to issue 1099-B tax forms with cost basis information to investors,” Shehan Chandrasekera, CPA, head of tax strategy at CoinTracker.io, a crypto tax software company, recently told Next Advisor. “This will significantly reduce the crypto tax filing burden.”
Crypto ETF Approval
There’s already been a major breakthrough on this front, with the first Bitcoin ETF making its debut on the New York Stock Exchange last October. The development represents a new and more conventional way to invest in crypto. The BITO Bitcoin ETF allows investors to buy in on cryptocurrency directly from traditional investment brokerages they may already have accounts with, like Fidelity or Vanguard.
“We do it in the equity market, we do it in the bond markets, people might want it here,” Gensler said at the Aspen Security Forum over the summer.
But some say the BITO ETF is not enough, because while the fund is linked to Bitcoin, it does not actually hold the crypto directly. The fund instead holds Bitcoin futures contracts.
ETF approval has been in consideration by the SEC multiple times over the past few years, but BITO is the first to gain approval.
What a crypto ETF means for investors
It’s too soon to tell how many investors will get in on BITO — but the fund did see lots of trading action in its first weeks. In general, the more accessible cryptocurrency assets are within traditional investment products, the more Americans could buy in and influence the crypto market. Instead of learning to navigate a cryptocurrency exchange to trade your digital assets, you can add crypto to your portfolio directly from the same brokerage with which you already have a retirement or other traditional investment account. Future of cryptocurrency is really interesting for investors because many investors put their Money and efforts in this unpredictable Market.
What Bitcoin price volatility means for investors
Bitcoin’s volatility is more reason for investors to play a steady long game. If you’re buying for long-term growth potential, then don’t worry about short-term swings. The best thing you can do is not look at your cryptocurrency investment, or “set it and forget it.” As experts continue to tell us each time there’s a price swing — whether up or down — emotional reaction can cause investors to act rashly and make decisions that result in losses on their investment.
The Future of Cryptocurrency
We can speculate on what value cryptocurrency may have for investors in the coming months and years (and many will), but the reality is it’s still a new and speculative investment, without much history on which to base predictions. No matter what a given expert thinks or says, no one really knows. That’s why it’s important to only invest what you’re prepared to lose, and stick to more conventional investments for long-term wealth building.
“If you were to wake one morning to find that crypto has been banned by the developed nations and it became worthless, would you be OK?” Frederick Stanield, a CFP with Life water Wealth Management in Atlanta, Georgia, told Next Advisor recently.
Keep your investments small, and never put crypto investments above any other financial goals like saving for retirement and paying off high interest debt. However Future of cryptocurrency is unpredictable.
